Market Commentary

Investors were rocked by economic data showing the economy hit the brakes hard in December.

Last week, major U.S. stock indices decelerated as investors gaped at the economic damage caused by the rising number of coronavirus cases around the world. There have been more than two million COVID-19 deaths globally, with more than 390,000 deaths in the United States. The spread has resulted in new lockdowns and restrictions and has hurt economic recovery.

The event at the United States Capitol building had a resounding impact around the world, but it didn’t deter global stock markets.

Last week, investors weighed the violent disruption of America’s 2020 presidential election process against the outcome of the Senate runoff in Georgia, and decided the latter was more significant. Financial Times reported the Democratic party’s win in Georgia improves the possibility of additional government relief spending in 2021:

Last week was the cherry on top of a turbulent year for investors.

After the $900 billion fiscal stimulus bill was signed on Sunday, major U.S. stock indices moved higher. The Washington Post reported, “The S&P 500-stock index, the most widely watched gauge, is finishing the year up more than 16 percent. The Dow Jones Industrial Average and the tech-heavy Nasdaq gained 7.25 percent and 43.6 percent, respectively. The Dow and S&P 500 finished at record levels despite the public health and economic crises.”

U.S. stock markets remained calm as a fresh chapter opened in the coronavirus stimulus saga last week.

Congress managed to cobble together a new stimulus package that was acceptable to both sides and pass it. The proposed package included money to help states distribute vaccines, an unemployment benefits extension, $600 checks for eligible Americans, aid for airlines, and other provisions, reported Mike Calia of CNBC.

Congress is at $900 billion, will they hear $1.4 trillion, $1.4 trillion, governments at $900 billion, who’ll go $1.4 trillion, $1.4 trillion…

The stimulus auction continued last week. Early on Sunday, The New York Times reported, “Lawmakers are on the brink of agreement on a $900 billion compromise relief bill after breaking through an impasse late Saturday night, with votes on final legislation expected to unfold as early as Sunday afternoon and very likely just hours before the government is set to run out of funding.”

When it comes to beverages, frothy can be delicious.

In what may be the least inspiring description of fizzy drinks ever written, a group of food engineers explained, “Aeration in beverages, which is manifested as foam or bubbles, increases the sensory preference among consumers.”

When is bad news good news? Take a look at last week.

Major stock indices in the United States hit all-time highs on Friday, despite a lackluster employment report and a surge in COVID-19 cases, reported Lewis Krauskopf of Reuters. During the week, we saw:

Last week, vaccine optimism immunized investors against signs of economic weakness.

In previous commentaries we’ve written about narrative economics, which holds that popular stories may affect individual and collective economic behavior. Last week, diverse narratives had the potential to influence consumer and investor behavior, but not all did. You may have read that:

The U.S. economy is like a semi-trailer truck. No one likes being stuck behind a semi at a stoplight because big trucks don’t go from zero to 60 in 2.5 seconds. Neither does the U.S. economy.

When the pandemic brought our economy to a near virtual standstill early in 2020, the U.S. government and Federal Reserve (Fed) took extraordinary measures to help the economy get going again:

Vaccine can be a powerful word. It’s worth 14 points in Scrabble (42 on a triple word square) and, last week, it was worth a whole lot more than that to financial markets.

On Monday, a pharmaceutical company and a biotech company announced preliminary trials of their vaccine show it may be 90 percent effective, reported Financial Times. The revelation conjured tantalizing visions of a future in which virus precautions are unnecessary and life returns to normal.

It’s said markets hate uncertainty, but that wasn’t the case last week.

Despite tremendous uncertainty about the outcome of the United States election, major domestic and international stock indices moved higher and the CBOE Volatility Index, better known as Wall Street’s fear gauge, moved 35 percent lower. Ben Levisohn of Barron’s reported:

Last week, financial markets and economic data told very different stories.

Reviewing economic data is a bit like looking in a rearview mirror. Typically, it offers information about what is behind us. For example, last week we learned:

Stimulus talks led investors in a merry dance last week.

So far in 2020, stock markets have been sensitive to fiscal stimulus. Last week, there was optimism a new stimulus package could be negotiated before the election. There also was skepticism about whether it would happen. An expert cited by CNBC stated, “There’s a lot of back and forth on stimulus and every headline makes the market move a little bit, but there’s no follow-through because we don’t have a clear picture on that front.”

It was a turbulent week for investors.

Waves of positive and negative news buffeted financial markets last week:

Yes. No. Maybe?

Markets were sharply focused on the status of stimulus last week. First, it was on. Then, it was off. Then, it might be on. Then, it was off again. There was a big bill. There was a smaller bill. There were stand-alone options.

Last week, the third quarter of 2020 came to an end – and the fourth quarter delivered a doozy of an October surprise.

President Trump has the coronavirus

On Friday Americans awoke to the news President Trump had contracted COVID-19. Financial markets responded with relative equanimity. After a brief sell-off on Friday, major U.S. indices finished the week, and the third quarter, higher.

For four weeks, the U.S. stock market has sparked and sputtered like a campfire in light rain.

Today, pandemic-driven demand is providing fuel for the investors. The need for certain types of products and services has accelerated and innovation is creating new opportunities. Consider:

Investors weren’t happy with central banks last week.

After the Federal Open Market Committee (FOMC) meeting, Federal Reserve Chair Jerome Powell confirmed the economy is recovering more quickly than anticipated:

Last week, the Nasdaq Composite Index set another record.

So far, 2020 has been memorable for many reasons, not the least of which is the incredible speed at which some events have been occurring in financial markets. This year, we’ve experienced:

Stock markets in the United States retreated a bit last week.

U.S. stocks have been trending higher for months. Last week, they gave back some gains. The Nasdaq Composite dropped 3.3 percent, while the S&P 500 Index fell 2.3 percent, and the Dow lost 1.8 percent, reported Ben Levisohn of Barron’s.

The stock market rallies like it’s 1986.

August has been a good month for stock investors. At the end of last week, the S&P 500 Index was up 6.8 percent for the month. The Index is poised to deliver its best returns for the month since 1986, when it gained 7.1 percent, reported Financial Times.

The shortest bear market in history is over.

The Nasdaq Composite and Standard & Poor’s 500 Indices finished at new highs last week. The stock market is considered to be a leading economic indicator, so strong stock market performance suggests economic improvement ahead.

The Standard & Poor’s (S&P) 500 Index finished the week within a whisker of its February high, reported Randall Forsyth of Barron’s.

It’s a remarkable feat. The stock market has recovered in just 175 days. Historically, comparable recoveries (those following market drops of 20 percent or more) have taken about four years, reported Vildana Hajric, Lu Wang, and Claire Ballentine of Bloomberg Quint.

There was good news and bad news in last week’s employment report.

The good news was the U.S. Bureau of Labor Statistics delivered better-than-expected data about employment. In July, the U.S. economy added about 1.8 million new jobs.

Last week delivered a mixed bag of financial and economic news.

As many expected, the U.S. economy did not fare well during the second quarter. COVID-19 lockdowns and business closings caused productivity to fall by one-third. Real gross domestic product, which is the value of all goods and services produced by our country, dropped 32.9 percent during the second quarter of 2020, reported the Bureau of Economic Analysis. During the first quarter of the year, productivity fell by 5 percent.

Where are we on vaccines and treatments?

During 2020, the United States government has spent more than $13 billion on Operation Warp Speed (OWS), which is focused on accelerating the development of vaccines and treatments for COVID-19, according to The Economist. The United States is not alone. Governments around the world are funding similar research.

Is the United States economy recovering or faltering?

It depends on who you ask and which data you consider. For example, last week, the Department of Labor reported fewer people applied for first-time unemployment benefits during the week of July 11. That could be a tick in the positive data column. Week-to-week the number declined from 1.31 million to 1.30 million. The lackluster decline could be a tick in the negative data column since the long-term weekly average is about 20 percent of that number.

Please don’t scream inside your heart.

Last week, a reopened Japanese theme park asked patrons to wear masks to help reduce the spread of coronavirus. It also asked them not to scream while riding the rollercoaster. “Please scream inside your heart,” park management urged.

What a quarter!

Who could have guessed a global pandemic would produce outsized stock market returns? Near the end of last quarter (March 23), the Standard & Poor’s 500 Index was down 30.75 percent for the year, and it looked like 2020 was going to be a disappointing year for many investors.

Blame it on the coronavirus.

Stock markets in the United States and Europe retreated last week as the number of new COVID-19 cases increased steadily in America. On Thursday, there were more than 44,000 new cases, the highest daily total to date, according to data from the Centers for Disease Control.

Could it be the upside surprises?

U.S. stock markets have marched higher despite a pandemic, an economic downturn, and social justice protests – and a lot of people have wondered why.

The Nasdaq Composite dipped its toes into record territory last week before retreating.

Stock indices in the United States rallied early last week on optimism about the reopening of businesses across the country. The Nasdaq Composite rose to 10,000 for the first time ever, before tumbling lower.

The employment report electrified U.S. stock markets last week.

American stock markets responded enthusiastically to the news U.S. unemployment was 13.3 percent in May. If it seems inexplicable double-digit unemployment would thrill investors, there is a reason. The unemployment rate in April was higher at 14.7 percent, and analysts had forecast the rate in May would jump to 19.1 percent. All in all, that makes 13.3 percent look pretty attractive.

Are those green shoots?

In economic terms, green shoots are signs of improvement. If you were paying close attention, you might have seen some in economic data released last week.

It was a good week for stock markets in the United States, but there was trouble in Asia.

U.S. stock markets rallied last week. The Dow Jones Industrial Average, Standard & Poor’s 500 Index, and Nasdaq Composite all gained more than 3 percent, reported Ben Levisohn of Barron’s.